UPDATE: 38 Infinity Ward Employees File Lawsuit Against Activision Over Royalties, Alleges Devs Held "Hostage"

UPDATE 2:53 PM: Activision has issued a brief response to the lawsuit:

"Activision believes the action is without merit," said a company spokesperson over e-mail just moments ago. "Activision retains the discretion to determine the amount and the schedule of bonus payments for MW2 and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right.

ORIGINAL STORY: The other shoe has now dropped.

I've obtained a copy of a lawsuit filed this morning in the Los Angeles Superior Court by 38 plaintiffs, calling themselves the "Infinity Ward Employee Group," against Activision. The Infinity Ward Employee Group (whom I'll refer to as IWEG throughout the rest of this story) alleges breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California labor code and more. The group is after a large amount of unpaid royalties.

"Activision owes my clients approximately $75 million to $125 million dollars," said Bruce Isaacs, one of the IWEG's attorneys at Wyman & Isaacs LLP, over the phone this afternoon. "Activision has withheld most of the money to force many of my people to stay, some against their will, so that they would finish the delivery of Modern Warfare 3. That is not what they wanted to do. Many of them. My clients' entitled to their money. Activision has no right to withhold their money -- our money."

The IWEG contains "a significant portion of the members of the creative team" who "designed, developed and delivered" Call of Duty: Modern Warfare 2 to Activision. According to the lawsuit, $28 million has been delivered to Infinity Ward employees for bonuses related to Modern Warfare 2, but the suit alleges at least $54 million is still due from 2009 profits alone.

They want more than $54 million, however. The IWEG is looking "to recover between $75 million and $125 million, if not more, in compensatory damages." That number's derived from:

• Unpaid bonuses from 2009 and 2010 sales generated by Modern Warfare 2 -- fourth quarter 2009 and first quarter 2010, specifically.
• Bonuses "due and owing to them" past first quarter 2010.
• "Bonus/royalty/profit participation" related to "technology/engine" royalties, "other special performance bonuses," "other studio bonuses" or "any other bonus/royalty/profit participation."'
• Lost value on "restricted stock units" that Activision "promised" would vest (read: own it in your own name and purchase it from Activision) when Modern Warfare 2 sales eclipsed Modern Warfare 1, which "has long ago occurred."
• Money owed as it relates to Modern Warfare 2 "sister games, including but not limited to" the oft-mentioned Modern Warfare 3, "if Modern Warfare 3 is ultimately delivered and marketed."
• Interest rates related to the above sums of money.

The lawsuit focuses on royalties generated for Modern Warfare 2 following release and the agreement between Infinity Ward employees and Activision for receiving the subsequent bonuses. The IWEG contends the only condition for becoming eligible for said bonuses was delivering Modern Warfare 2 in time for the game's intended November 10, 2009 launch. Modern Warfare 2 did launch as scheduled on November 10 last year, generating $1.1 billion in 2009.

Modern Warfare 3 has been mentioned during the legal back-and-forth between ex-Infinity Ward leadership Vince Zampella and Jason West and Activision, and it's brought up again here, too.

The IWEG alleges Activision has "improperly withheld this specifically identifiable sum of money from the members of IWEG in order to force them to keep working for Activision so that Activision could receive delivery of Modern Warfare 3." The suit alleges Activision "made a calculated, purposeful and malicious decision" to withhold proper bonuses "in an attempt to force employees of Infinity Ward to continue to work at a job that many of them did not want just so Activision could force them to complete the development, production and delivery of Modern Warfare 3."

The legal language gets harsher, too.

"In short," reads the lawsuit, "Activision withheld the property of the IWEG in an attempt to keep the employees hostage so that Activision could reap the benefit of the completion of Modern Warfare 3."

What does the IWEG want in return? "At least in the additional amount of $75 million to $500 million as an award for punitive damages," continues the lawsuit, citing a number calculated from the blockbuster sales of Modern Warfare 2 and "Activision's net worth."

The IWEG also believes Activision violated California Labor Code during their alleged failure of payment.

"Activision has a duty to pay all of the members of the IWEG all of the money they are owed [...] within 72 hours of the termination of their employment," reads the lawsuit. "Activision, however, has failed to do so."

The full list of plantiffs mentioned in the suit (not all of them have left Infinity Ward): Todd Alderman, Frank Gigliotti, Roger Abrahamsson, Brad Allen, Mohammad Alavi, Richard Baker, Chad Barb, Keith Bell, Chris Cherubini, Taihoon William Cho, Chris Dionne, Joel Emslie, Robert Field, Steve Fuduka, Robert Gaines, Chance Glasco, Preston Glenn, Joel Gompert, Chad Grenier, Mark Grigsby, John Haggerty, Jacob Michael Keating, Chris Lambert, Ryan Lastimosa, Fairfax S. McCandlish IV, Jason McCord, Brent Mcleod, John Paul Messerly, Stephen Miller, Zied Rieke, Jon Shiring, John Slayback, Richard Smith, Geoffery Smith, Jiesang Song, Todd Sue, Rayme C. Vinson and Lei Yang. All are represented by Wyman & Isaacs LLP located in Los Angeles.

Bold claims. I've reached out to Activision for comment.

Clearly, however, the drama involving Infinity Ward is far from over.

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